Quiz #222 answers

• 1. If workers (on average across the economy) suffer real wage losses because their nominal wages fail to keep pace with the inflation rate then a greater share of national income is going to profits.

Answer: False

• 2. The wider the spread between the price the central bank sets on the reserves it provides the commercial banks on demand (so-called penalty rates) and the target policy rate the more difficult it becomes for the central bank to ensure the quantity of reserves is appropriate for maintaining its target policy rate.

Answer: True

• 3. Assume that a national is continuously running an external surplus of 1 per cent of GDP. This surplus provides the scope for the government to run a equivalent surplus and still satisfy a desire by the private domestic to save overall.

Answer: False